Mumbai: If India has to grow, it’s not about large corporations growing but about micro-entrepreneurship developing at the grassroots level,” says Siddhartha Pahwa, group chief executive at Meru Cab Co. Pvt. Ltd.

One of the early starters in this business, launched in 2007 as a radio cab service, Meru has a fleet of about 20,000 cars, of which 6,000 are company-owned, in 21 cities.

The company started revamping since late last year, looking to raise a total of $100 million so it can compete with other rivals, of which it has raised about $25 million, Mint had reported in June. Pahwa spoke about what he says is a subject close to his heart—drivers as micro-entrepreneurs. Edited excerpts:

Why do you believe driver-owners are entrepreneurs?

We have had this concept since 2007 where we did not call them our drivers or employees. We called them DSE—driver, subscriber, entrepreneur. Meru’s business model is that the driver decides how much he wants to work. We never had any rules on how many hours he has to work. We give you a car, you pay a sum on the car, you keep it 24x7 and then all upsides are yours. An entrepreneur is someone who, for all the hard work, should get a large part of the rewards. About 40% of our drivers in Bengaluru and Hyderabad send their children to English-medium schools where the fees could be as high as Rs1,500-2,000. A large set, 10%, of their children, are doing post-graduation.

Was a change in mindset needed?

None of these guys are used to saving or long-term planning—what they get today, they spend today. Then, they don’t get anything tomorrow and get upset (laughs). If you work hard, we will give a concept, for a safety net. The first right over your earnings is yours, I will take my share later. Initially, all cars belonged to us.

In 2011-12, we came with a plan. You buy your own car. If you can raise money yourself, then good, or we will buy it for you. You run it for four years, and fifth year on, when there is no EMI, it’s yours.

People started buying, in the scheme called Chaalak se Maalak. The driver becomes an owner. People realized if I pay down my EMIs (after three years of scheme), I can buy a second car. Then they got a second driver. For all training, etc. he will work with Meru but financial deals are done between first and second driver. He is a service provider now; no longer just a driver.

They started earlier with hiring family, nephews, people from village, etc. but realized this is limiting and so started developing relationships and responsibilities. This has become second-third level.

Long term, we believe this industry would need a million drivers. Currently, the gap is still big. None of the drivers want their children to do this profession, though they earn Rs25,000-30,000 a month. They believe their children would be better off even if they become a call-centre employee, for example. The reason is dignity of labour: Society needs a change of mindset.

In India, only 5% of the households have vehicles—the global average is more than 40%. India does not have the infrastructure for this. Taxis can take care of (transporting) seven-eight families a day. Taxis will help reduce burden on infrastructure and environment. What we are trying is to make the process of getting drivers in easier and make it a robust system in tier II-III cities. Out of 100 drivers, if 30-40% say they will allow their children into the profession, I would believe the shift has happened—of driving being considered a profession on equal footing with others.

How are you doing things differently now since 2007-08?

Meru had a strong back-end technology when we started. Since 2012, when Ola, Uber came in, we realized our front end may not be as good. We had a website and a call centre. We shifted to an app. By early 2013, we were on a par with others in both back-end and front-end technology. We believe we are way ahead in processes, on how to handle customers and passengers. The competition is using only incentive as a system. They give smaller fares and give double to drivers but our ecosystem is stronger. We have a scholarship programme for our drivers’ children. We get drivers for at least four years and exclusively. That gives us a longer/better relationship, rather than a purely transactional one.

We as an organization believe you have to earn some margins or some loss for some period. The kind of capital abuse that’s happening in India in this sector is worrisome. More competition should survive so benefits to sellers and consumers continue. If the industry survives, infrastructure and environment issues will be resolved.

You are trying to raise $100 million, of which a quarter you already have. How does this benefit the drivers?

We clearly do not want to go head-on with any of our competitors. There is still a lot of training needed, which will be a focus, plus internal quality and in-cab quality.

Will you also expand to more cities?

There are 45 cities where this cab service is useful; we are in 21. We believe this year our focus is to consolidate these cities—with more cars, drivers and better technology—and we will not expand to other cities. I believe the number of trips a car does in India is much lower than the number in others, like Singapore, for example. The industry average is 10-12 trips, Singapore does 20-25 trips. There are many dead pockets in Mumbai, like the extreme south. That’s where training and knowledge is useful. In such a large country, where you have to move 300-400 million people a day, a large market share will be with a few (service providers), but the third player can be niche, and profitable. We are the first choice for people going to the airport because of advance booking. That route is owned by us.